1. Field of the Invention
The present invention relates to a method and apparatus for improving the loss ratio on a book of insurance. More particularly, the present invention relates to a method and apparatus for improving the loss ratio on a book of insurance such as a worker's compensation, general liability, products liability, property, professional liability or the like.
2. General Background of the Invention
Traditionally, entities such as businesses purchase insurance from licensed insurance companies or underwriters through their insurance agent. Insurance agents typically have access to many insurance companies through their markets. The agent and the business seeking insurance typically complete a standardized application for insurance coverage (for example, that form provided by Accord).
The application is typically transmitted via fax or electronically to underwriters who then determine if the risk falls within the underwriters' acceptable underwriting guidelines. If so, they determine a rate for one or more types of coverages, possibly with variable limits, and produce a quote and send it back to the agent. The agent then presents the quotes obtained from the market to his client (the business owner).
When the business owner and the agent decide to accept the quote, the agent binds coverage which in effect tells the underwriter that they accept the quote and would like coverage to begin on a certain date and time. The underwriter then produces a policy and sends it to the agent or business owner who is now the insured. The underwriter also produces an invoice and sends it to the agent or the insured. Usually with the invoice comes loss reporting instructions and other materials to assist the insured with being compliant with applicable laws.
During the policy period each insured enjoys the comfort of knowing that certain losses will be covered by the policy in exchange for conforming with the policy terms (paying the premium and acting in good faith).
With worker's compensation and general liability coverages, the premiums are determined by amount of payroll, by job classification, and by gross revenues. When applying for insurance for one year terms, these figures are typically estimated on the insurance application, and from those estimates, the underwriter's rates are applied and premium determined. After policy expiration, under the policy terms the underwriter has the right to audit the insured's actual payroll, gross sales, and/or proper classification to determine whether additional premium or refund is due.
While certain novel features of the invention shown and described below are pointed out in the annexed claims, the invention is not intended to be limited to the details specified, since a person of ordinary skill in the relevant art will understand that various omissions, modifications, substitutions and changes in the forms and details of the invention illustrated and in its operation may be made without departing in any way from the spirit of the present invention. No feature of the invention is critical or essential unless it is expressly stated as being “critical” or “essential.”